In a move that holds uncertain implications for the hospital industry, Providence Health System last week agreed to settle a closely watched lawsuit filed on behalf of uninsured patients who claim the Portland, Ore.-based hospital system violated its charitable mission by overcharging them for care.
The settlement is the first to be proposed among 60 state lawsuits filed by a consortium of attorneys led by Oxford, Miss.-attorney Richard Scruggs, who is challenging charity-care policies of large not-for-profit hospital systems. A previously proposed $150 million settlement struck in federal courts with North Mississippi Health Services, Tupelo, unraveled in April.
If approved by Multnomah County Circuit Court Judge Richard Baldwin, the Providence settlement could qualify tens of thousands of low-income Oregonians for refunds, vouchers or medical bill reductions, attorneys said.
But whether Providence's agreement marks just the first of many settlements to come remains to be seen. "Providence has stepped up to the plate and shown the way for other hospitals that have vigorously fought such litigation," said John Phillips, an attorney with Phillips Law Group, Seattle, one of the law firms representing the plaintiffs. The American Hospital Association, however, downplayed the notion that Providence's settlement could spur others to follow suit. "We don't think this sets any precedent," said AHA spokesman Richard Wade. "Every state has different laws, and every hospital has to look at its own situation and decide independently what makes the most sense for them."
Providence said it disagreed with the plaintiffs' allegations but ultimately decided it would be far less costly and inconvenient to settle the lawsuit than to battle it out in court. "Discovery and trial are tremendously expensive and time consuming, and then there's the possibility of appeals," said Providence Senior Vice President Greg Van Pelt. "We felt it was in our patients' best interests to resolve this sooner rather than later."
The settlement was inked just weeks after Baldwin granted class-action status to a similar lawsuit pending against cross-town rival, Legacy Health System, also based in Portland.
Stuart Gerson, a defense attorney with the law firm Epstein Becker & Green in Washington, said he expects a number of other hospitals to ultimately reach similar settlements -- albeit more in response to community pressure than litigation. "Plaintiffs' lawyers are like rhinoceros birds," he said. "They flap their wings and take credit for moving the herd across the jungle."
Van Pelt says Providence is comfortable with the settlement's terms, which reflect pricing policies the system already has in place. Providence expects to spend $50 million on charity care this year, up 43% from 2004.